Rotary Engineering

Rotary Engineering

Postby winston » Tue May 13, 2008 2:47 pm

• Below; matter of project recognition. 1Q08 net profit of S$10.2m (+7% yoy) represents 16% of our FY08 forecast and 17% of consensus estimate because of lesser project recognition in the quarter (1Q07: Universal Terminal project was
running at its peak). Accordingly, group turnover dropped 8% yoy to S$117.1m.

Nonetheless, we are not worried as revenue should pick up in subsequent quarters with several key projects scheduled for completion in 3Q08 and 4Q08.

• Margins improved, despite rising costs. Impressively, margins continued to expand yoy despite global cost pressures. Gross margins met our estimate of 21%, up from 18% in 1Q07, while EBITDA margins improved to 13% from 10.6% in 1Q07.
Management guided that its steel costs are pegged to steel price indices and the company is usually able to pass them on to customers.

Also, equipment requirements would have been locked in after the signing of contracts while labour cost increases are within expectations. Management guided that all projects are on track to meet delivery and budget.

• Order flow improved yoy, though could be slower than our expectations; FY08-09 earnings reductions. Order book was S$655m with YTD order wins of S$188m (+65% yoy). While more new chemical/petrochemical investments are slated to flow into Jurong Island, new projects could take a longer time to finalise, now that customers are more watchful over costs. We believe potential contracts from the Middle East could also be pushed back on similar grounds.

Accordingly, we are reducing our order-win assumptions to S$450m (from S$485) for FY08 and to S$600m (from S$630m) for FY09. This lowers our FY08-09 earnings estimates by 5% for FY08-09.

• Singapore remains key market. Enquiries for Singapore projects remain high. We believe that with Universal Terminal almost fully taken up, there is a possibility for investments of a similar size on Jurong Island soon to meet rising demand as Jurong Island flowers into an oil refinery and petrochemical hub.

• Maintain Outperform; lower target price of S$1.39 from S$1.44. Our target price is still set at 12x CY09 EPS. Contract wins remain potential catalysts for the stock.
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Re: Rotary Engineering

Postby winston » Fri Jun 20, 2008 9:25 am

Rotary Engineering - Singapore oil and gas infrastructure services firm Rotary Engineering said on Thursday it has secured two engineering, procurement and construction contracts totalling S$102 million ($75 million) from Germany's unlisted oil storage terminal operator Oiltanking Group.
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Re: Rotary Engineering

Postby winston » Fri Jun 20, 2008 1:45 pm

Not vested. From CIMB:-

Rotary Engineering (S$0.84) - Limited downside risk

Our recent investors’ meetings with management have given us greater confidence in Rotary’s prospects over the next 3-5 years, in the Middle East, Singapore as well as the region.

Separately, Rotary announced that it has secured two new contracts worth S$102m from Oiltanking in Jurong Island. Our earnings estimates have been adjusted (lowered by 4% for FY08 but raised by 2.5% for FY10) to reflect higher administrative expenses but higher order wins assumed for FY09.

Maintain Outperform and target price of S$1.39, still based on 12x CY09 EPS. Rotary is trading at 7x CY09 P/E, near its trough in Jul 06. Given its attractive dividend yield of about 6% and potential positive surprises from sizeable contracts in the Middle East, we see limited downside risks.
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Re: Rotary Engineering

Postby winston » Fri Jun 20, 2008 9:08 pm

Not vested. BTW, would they be hurt by higher raw material prices, low US$ and higher wages ?

========================================


Rotary on players' radar screens
By VEN SREENIVASAN

THE soaring demand for and price of oil has turned out to be the biggest challenge facing many companies in recent memory. But challenges for some can be opportunities for others.

Mainboard-listed Rotary Engineering is a case in point. The company is one of Asia's most established builders of oil storage terminals and depots, with a footprint that stretches from the Middle East, to South Asia, South-east Asia and China.

One only needs to step over to Singapore's petrochemical hub at Jurong Island to view its handiwork. The island houses the lion's share of the more than 1,000 tanks comprising seven million cubic metres of storage capacity that Rotary has built to date across the continent.

One of its biggest contracts, completed late last year, was the $535 million deal to build 73 storage tanks and 12 marine jetties for Heng Leong group, one of the region's largest oil traders. It is currently working on $400 million worth of projects on the island, including Shell's Houdini. And orders keep flowing in. Yesterday, the company announced its latest deal: A $102 million contract from Jurong Island-based Oiltanking Group to build chemical storage facilities and terminals.

The rapidly changing dynamics of the global energy sector continue to fuel Rotary's order books. In recent years, there has been an increasing trend in major energy-producing countries to store and process their own oil and gas, rather than let all their output go directly through the hands of the global energy majors. This, in turn, has fuelled the demand for more storage terminals and tank farms.

Rotary has been capitalising on this trend by aggressively courting more projects in the Middle East, China, India and elsewhere. Early this year, it increased its stake in its joint venture company, Petrol Steel Co Ltd, in Saudi Arabia to 51 per cent and announced a US$62 million deal with Saudi Kayan Petrochemical Company to construct 24 tanks for its Saudi Kayan Petrochemical Complex in Al-Jubail. More deals could be in the pipeline if other clients it is courting, such as Aramco and Sabic in Saudi Arabia and Kuwait's National Petroleum Corp, follow suit.

The company is already prequalified for Aramco's multimillion-dollar Jubail Export Refinery Project and Yanbu Export Refinery Project in Saudi Arabia. Not surprisingly, company officials seem quietly confident that Rotary's over $600 million order book could surpass $1 billion before the end of this year.

The results are already evident. Rotary recently posted record full-year earnings of $52.8 million, up 50 per cent from 2006's $35.2 million. It turned in a net profit of $10.2 million for the first quarter ended March 31. And even as it continues to secure more projects in Asia and the Middle East, it is already venturing into new markets in Africa and Latin America where new oil discoveries are fuelling demand for more terminals.

Recently, Rotary started going downstream into its own inland energy depot and distribution business as demand for these facilities intensifies in countries like India and China in the face of distribution bottlenecks at their coastal terminals. Late last year, it invested some $20 million to set up its 45 per cent-owned venture Jinzhou Everthriving Logistics Co Ltd to distribute liquefied natural gas from Inner Mongolia to key cities in north-east China. Plans are now underway to replicate the model in Vietnam, India, Indonesia and the Middle East, where demand is on the rise.

Yet another new venture it is currently embarking on is waste energy reprocessing. Rotary's 40 per cent-owned waste-to-energy plant on Jurong Island collects waste oils and chemicals, oxidates them, then converts them into steam energy to customers such as Perstop (S) Pte Ltd, which, in this case, produced and supplied the waste oil in the first place. Quite a neat and profitable green venture. If Rotary continues on its current growth trajectory, its share of income from offshore projects could soon exceed domestic Singapore contributions (last year domestic revenue accounted for 80 per cent of its topline).

Perhaps, not surprisingly, the company recently started attracting the attention of bigger international players who are keen to expand their global footprint via acquisitions. Whether its current shareholders, led by founder Chia Kim Piow, would be willing to part with their company remains to be seen. But the fact that Rotary is now on the radar screens of bigger global players testifies to the achievements of this homegrown company.
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Rotary Engineering

Postby purplecloud » Mon Aug 04, 2008 10:36 am

Am vested ....

0100 GMT [Dow Jones]

STOCK CALL: OCBC Investment Research restarts Rotary Engineering (R07.SG) at Buy with S$1.13 fair value, pegged at 10X FY08-09 P/E. Says Singapore-based plant builder in sweet spot to benefit from booming oil & gas infrastructure projects in Middle East; "we are optimistic of both main contractor and subcontractor jobs flowing to them for the storage tank packages of refinery projects."

Notes company's edge over rivals; "unlike other companies that are not specifically in the oil and gas space, we think that Rotary's position in being able to directly address the burgeoning petrochemical and refinery business sharpens its earnings profile while dulling the edge of rising costs via escalating oil prices."

Stock closed +7.4% at S$0.73 Friday. (FKH)
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Re: Rotary Engineering

Postby winston » Wed Aug 06, 2008 2:20 pm

Not vested. From CIMB:-

• Below expectations. 2Q08 net earnings of S$11.8m (-38%yoy) is about 27% below our expectations and consensus. 1H08 net earnings of S$22m made up about 41% of both our and street estimates. The variance is mainly due to lower than-expected order book recognition. We expect earnings to catch up in 2H08 as more projects are slated for completion.

• Key positive: margins sustained. Gross margins of 18.8% were within guidance and are expected to rise in 2H08 as more contracts are progressively delivered. Cost pressures were well managed especially labour cost with Rotary’s own manpower resources and training centres in China and India. Customers are also willing to accept higher quotes on the back of inflationary environment.

• Key negative: slower new order wins. While YTD order book remains strong at S$609m, Rotary only clinched S$56m new contracts in 2Q08 (1Q08: S$188m). Rotary has already submitted tenders for Jubail and Yanbu refineries in Middle East but we believe the actual award will not be out until 2009. We believe that Rotary is currently consolidating its resources after the completion of Universal Terminal project end-07 in preparation for sizeable contracts. We are cutting our order assumption for 2008-2009 to S$400m and S$550m (previously S$450m and S$600m respectively). We have also shifted some order recognition from FY08 to FY09. Accordingly our earnings estimates are cut by 6-15% for FY08-09. Our FY10 forecasts remain intact.

• Maintain Outperform but target price lowered to S$1.09 from S$1.39, based on 10x CY09 EPS. We ascribed a 20% discount to Rotary’s forward P/E valuation from 12x to 10x, in line with the sector in the region. Our lower target price also takes into consideration the earnings downgrade. Even with the cut, Rotary still offers good upside and decent dividend yield of about 6%. It is trading at 6.5x CY09 EPS, close to its trough of about 5x in Jul-06. Key catalysts include sizeable wins in Middle East and contracts secured in the region.
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Re: Rotary Engineering

Postby kazataza » Wed Aug 06, 2008 4:50 pm

vested and still holding...
investor is retail investor friendly i think....if i didnt remember wrongl, they actually round up the bonus shares they give to shareholders to full lot FOC 1 or 2 yrs ago....i think quite rare for a company to do that
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Re: Rotary Engineering

Postby purplecloud » Thu Aug 07, 2008 10:17 am

kazataza wrote:vested and still holding...

......if i didnt remember wrongl, they actually round up the bonus shares they give to shareholders to full lot FOC 1 or 2 yrs ago....i think quite rare for a company to do that


U are rite :P & i was 1 of the beneficary ......
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Re: Rotary Engineering

Postby kazataza » Thu Aug 07, 2008 4:44 pm

lucky u purplecloud...i only bot into this counter some months ago....
my spouse was one of the "beneficiary" of that rights offer..so i vividly remember about it
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Re: Rotary Engineering

Postby purplecloud » Fri Aug 08, 2008 9:17 am

hola Kaza.... u might hv entered at a much lower price than I did in 2006 .. even after averaging ..... the stock pr was over 70cents :mrgreen:

The only wonderful thing was I later manage to offload it a very handsome profit .... oh well ... now I do still hv some at above $1 ..... all stocks hv taken a beating .. even the solid blue chip ones ..... I believe Rotary has very gd prospects ahead .... some patience needed to realise tat pot of gold later ..... :lol:

take care ... ciao
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